Military Update: Senators accept plan to squeeze commissary benefit

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In this file photo from Jan. 8, 2013, military family member Amber Korpalski selects vegetables from the produce section of the commissary at Camp Foster, Okinawa, Japan. (Elizabeth Casez/U.S. Marine Corps)
In this file photo from Jan. 8, 2013, military family member Amber Korpalski selects vegetables from the produce section of the commissary at Camp Foster, Okinawa, Japan. (Elizabeth Casez/U.S. Marine Corps)

Military Update: Senators accept plan to squeeze commissary benefit

by: Tom Philpott | .
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published: May 22, 2015

The Senate Armed Services Committee has accepted a Defense Department plan to pare taxpayer support of base grocery stores, which if enacted into law would lower shopper savings at least two percentage points next year as well as cut store operating hours and other shopper services.

Defenders of the benefit for military families and the military resale industry fear the committee’s action, if it becomes law, would be a significant first step toward devaluing, or even phasing out, discounted on-base shopping at stateside bases.

The Senate committee adds fuel to that fear with language in its version of the 2016 National Defense Authorization Act (S. 1118) not only to lower funding for Defense Commissary Agency (DeCA) by 23 percent next fiscal year but directing studies on privatizing on-base grocery stores and ordering testing of privatization for at least five commissaries.

The House version of the bill would protect the benefit and ignores warnings from the Joint Chiefs of Staff that, in this era of smaller defense budgets, spending on stores must be sacrificed to free up dollars for training and other critical readiness needs.

Difference between the bills will need to be ironed by House-Senate conferees, assuming the commissary initiatives survive Senate floor debate and final funding decisions from the Senate appropriations committee.

Sen. James Inhofe (R-Okla.) said he fought hard again privatization during committee markup of the bill and would continue to fight it with a floor amendment.  There is much at stake here for exchange services too.

Unlike commissaries, exchanges generate profits through sales in base department stores and specialty shops, then uses those “dividends” to fund on-base morale, welfare and recreational activities.  But exchanges rely on deeper savings at commissaries to draw customers onto base.  Exchanges reportedly saw a 40 percent decline in sales when stateside commissaries closed briefly during a partisan budget flap in Congress three years ago.

The Senate committee accepts in full the Obama administration’s call to cut $322 million from DeCA’s $1.4 billion budget beginning Oct. 1.  DeCA Director Joseph Jeu, on orders from superiors, came up with this savings plan months ago.  He explained in memo to the deputy defense secretary how the savings could be achieved.

A total of $183 million per year would be saved through operating efficiencies, Jeu wrote, and another $139 million if Congress enacts two legislative changes to make commissaries “more self-supporting.”

One would have DeCA stop paying “second destination transportation costs” needed to deliver fresh produce to commissaries overseas.  Instead, suppliers would have to bear those costs and presumably pass them on to shoppers as higher prices.  DeCA estimates patrons would see overall savings drop from an average of 30 percent down to 28 percent.

The Senate bill also would allow DeCA to use some of the five-percent surcharge collected from patrons at checkout to buy operating supplies.  Surcharge dollars now can only be to maintain and modernize current stores and to build new ones when necessary.

The Senate bill also embraces the notion that stores can be operated more efficiently.  Though the Senate bill doesn’t endorse specific actions Jeu said he would have to take, his action plan is well understood.  It includes:

◾ Reducing store days of operation to save $58.2 million a year in labor costs.
◾ Reducing store hours per day to save another $29.5 million.
◾ Executing scheduled store closings: $27.3 million.
◾ Cutting equivalent of 200 fulltime staff: $18.8 million.
◾ Streamlining transport of fruits and vegetables to the Pacific: $40.8 million.
◾ Closing commissaries on all holidays: $4.5 million.
◾ Ending DeCA support of six overseas Navy exchange stores or NEXMarts where lines of commissary goods are sold at cost: $3 million.
◾ Canceling case-lot sale events: $900,000.

The Senate committee, chaired by Sen. John McCain (R-Ariz.), also takes a harder line than does the House on dampening pay and allowances as military leaders urged. McCain and colleagues for a third straight year would impose a cap on the January pay raise, allowing only 1.3 percent rather than 2.3 percent to match private-sector wage growth.  Star-rank officers, for a second year, would see no January basic pay increase.

The one-percent cap would save $700 million next year with savings multiplying over time.  The House voted to support a full pay raise.

The Senate committee also endorses the Pentagon plan to trim adjustments in Basic Allowance for Housing until recipients are paying five percent of average local rental and utility costs out of pocket.  The Senate voted for the same plan last year. House-Senate conferees instead held down last year BAH raises by a percentage point and said they would await recommendations on allowances from the military pay commission.

The commission’s January report punted on the allowances issue, saying the department and Congress should determine what’s adequate to support a volunteer force.  So the Senate committee is back to embracing smaller BAH-rate hikes for several more years.  The House bill does not.

Finally, the Senate bill fully embraces the commission’s recommendations for replacing the 20-year-or bust military retirement with a plan that cuts annuities for the future force by 20 percent but also provides a 401(k)-like Thrift Savings Plan with government matching contributions.

McCain noted again that 83 percent of service members leave with no retirement benefits under the current plan because they don’t service the required 20 years.  Under the new plan, mandated for future generations and offered as an option to the current force, 75 percent of members would leave service at least with TSP balances boosted by government matching.

The Senate committee does not enrich the commission plan, as the House does, by allowing government matching of TSP contributions beyond 20 years’ service. Also, the Senate plan, unlike the House, doesn’t reject as too risky the commission idea of offering members at retirement a lump sum in return for forfeiting annuities until age 67.

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